Facebook co-founder gives up US citizenship
The decision by Eduardo Saverin before the IPO is seen as a move to limit his tax liabilities.
By Danielle Kucera, Sanat Vallikappen and Christine Harper
Eduardo Saverin, the billionaire co- founder of Facebook, renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill.
Facebook plans to raise as much as $11.8 billion through the IPO, the biggest in history for an Internet company. Saverin's stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion. His holdings aren't listed in Facebook's regulatory filings. Saverin, 30, joins a growing number of people giving up U.S. citizenship, a move that can trim their tax liabilities in that country. The Brazilian-born resident of Singapore is one of several people who helped Mark Zuckerberg start Facebook in a Harvard University dorm and stand to reap billions of dollars after the world's largest social network holds its IPO.
"Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time," said Tom Goodman, a spokesman for Saverin, in an e-mailed statement.
Saverin's name is on a list of people who chose to renounce citizenship as of April 30, published by the Internal Revenue Service. Saverin renounced his U.S. citizenship "around September" of last year, according to his spokesman.
Singapore doesn't have a capital gains tax. It does tax income earned in that nation, as well as "certain foreign-sourced income," according to a government website on tax policies there.
Post continues below.
Saverin won't escape all U.S. taxes. Americans who give up their citizenship owe what is effectively an exit tax on the capital gains from their stock holdings, even if they don't sell the shares, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan's law school. For tax purposes, the IRS treats the stock as if it has been sold.
Renouncing your citizenship well in advance of an IPO is "a very smart idea," from a tax standpoint, said Avi-Yonah. "Once it's public you can't fool around with the value."
Saverin previously scuffled with Zuckerberg, his Harvard University classmate, over his ownership in Facebook. Saverin sued him and settled for an undisclosed amount.
The 2010 movie "The Social Network" added to Saverin's fame after it portrayed him as a scorned friend who provided the company's early financing and then was squeezed out. In the film, written by Aaron Sorkin, Saverin was portrayed by Andrew Garfield, who will play Spider-Man in "The Amazing Spider- Man."
Saverin moved to the U.S. in 1992, and became a citizen in 1998, his spokesman said. He has invested in Asian, U.S. and European companies, according to his spokesman.
He plans to invest in Brazilian and in other global companies that have strong interests in entering the Asian markets. "Accordingly, it made the most sense for him to use Singapore as a home base," Goodman said in the statement.
His U.S. holdings include Jumio Inc., an online payments company, and ShopSavvy Inc., a price-comparison service.
Renouncing citizenship is an option chosen by increasing numbers of Americans. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, according to government records.
Income-tax rates for top U.S. earners will rise to 39.6 percent from 35 percent next year, and rates on capital gains and dividends also are scheduled to rise unless Congress blocks the increases.
"It's a loss for the U.S. to have many well-educated people who actually have a great deal of affection for America make that choice," said Richard Weisman, an attorney at Baker & McKenzie in Hong Kong. "The tax cost, complexity and the traps for the unwary are among the considerations."
Some of the world's largest wealth-management firms have ramped up efforts to fight tax evasion ahead of Washington's implementation of the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion by Americans with offshore accounts. HSBC Holdings Plc, Deutsche Bank AG, Bank of Singapore Ltd. and DBS Group Holdings Ltd. all say they have turned away business.
The 2010 law, to be phased in starting Jan. 1, 2013, requires financial institutions based outside the U.S. to obtain and report information about income and interest payments accrued to the accounts of American clients. That means additional compliance costs for banks and fewer investment options and advisers for all U.S. citizens living abroad, which may depress banks' returns.
Facebook plans to price its IPO on May 17, offering 337.4 million shares at $28 to $35 each. The shares will be listed on the Nasdaq Stock Market under the symbol FB. Morgan Stanley (MS), JPMorgan Chase (JPM) and Goldman Sachs (GS) are leading the sale.
To contact the reporters on this story: Danielle Kucera in San Francisco at email@example.com Sanat Vallikappen in Singapore at firstname.lastname@example.org Christine Harper in New York at email@example.com
To contact the editors responsible for this story: Tom Giles at firstname.lastname@example.org
Hey U.S. Government, what is a Billion dollars times 0%? In case you went to an American public educational institution that equals $0!! Wake up!! We live in a global society in which people can move, or at least move their assests. We need to lead the world in innovation and growth. We won't get there by demonizing and persecuting those who succeed.
Let's stop class warfare and envy against those who do well. Let's give them a reason to stay and invest here. This guy is looking around the world to invest his money. We are competing with the world and holding a losing hand.
For those of you that are bad mouthing this guy I have a couple of questions. Have you ever used a deduction when filling income tax? If so you have done the same thing this guy is doing. You have limited the tax you owe by using a legal tax reduction. The next question is why do any of you think you have a right to this guys money? He earned it. It is not the governments money, (the government has no money), and it is not your money. The idea that someone with more then you should pay more then you only makes sense to those on the receiving end and a few ultra rich who live in fantasy land.
Our country is broke. The current tax levels don't provide enough money to pay the interest due on our debts. None of the last 4 administrations have done anything to solve this problem. They have all added to the problem by spending more then they take in. The largest portion of our governemts spending goes to social programs. There needs to be severe cuts in government spending to balance our budget but if we don't then the gravy train will grind to a stop and the last great depression will seem like the good old days.
I personally would not give up my citizenship. I think the United States is the best nation on the planet. I also think that rational, conservative thinking will one day again hold sway and the entitlest mentality will be seen as a low spot in history.
I love the way that some people say over 40% of people don't pay income tax. Maybe it is because they have no income so kind a hard to pay income tax. And this guy who has made billions, they say way to go good for him. So complain about people with no income not paying income tax and stand up for guy with money not paying what he should.
I don't blame him at all. Too many people act like he is un-American or something. Oh yea, he is from Brazil! Oh yea, he has lived in Singapore for years. But you think oh yea, he's rich! He should pay his fair share. He does pay taxes and will continue to pay some taxes. He just wants to protect paying more than he has to like every one else. Considering he uses no services of the U.S., does not live here and was not raised here. Why should he have to pay more than he has to. Especially when almost 40% of citizens pay $0.00. How many of you lie on your taxes, try to find every deduction you can, avoid paying anything you can, and you live here and use all the advantages we have here that the government pays for.
typical of the super rich... they never have enough and never think they owe...he came here exploited the benefits of this countrys legal system and economy and now is running away from his debt
Copyright © 2013 Microsoft. All rights reserved.
Start investing in technology companies with help from financial writers and experts who know the industry best. Learn what to look for in a technology company to make the right investment decisions.
Heading into the enterprise software giant's latest earnings release, it appears that its share price fails to truly reflects the company's long-term value.
VIDEO ON MSN MONEY